Vedanta may acquire at least 51% in Cairn India

London-listed Vedanta Resources Plc is in talks to acquire a majority 51 per cent stake in Cairn India for about $8-8.5 billion (nearly Rs 40,000 crore) and the deal may be announced on Sunday evening or Monday.

Scottish explorer Cairn Energy Plc, which holds 62.37 per cent interest in the India-listed Cairn India, is seeking up to 20 per cent premium for passing on controlling stake, two persons in know of the development said.

The deal will be contingent on government approval as Cairn’s three producing oil and gas assets including the giant Rajasthan fields and seven exploration blocks either have explicit provision for seeking prior approval before transfer of interest or gives pre-emption or right of first refusal to partners like ONGC.

The sources said Cairn Energy has been in talks with Vedanta for three weeks now and talks centre around selling majority stake.

“If Cairn Energy was to sell a minority 10-12 per cent stake, they would have done that on the stock exchange. Moreover, it does not make sense for an investor like Vendata to make portfolio investment,” a source said.

Upon acquisition of majority stake, Vedanta Resources will have to make an open offer for additional 20 per cent stake and may even choose to delist. However, India’s market regulator Sebi has now proposed for revising open offer size to up to 100 per cent, in which case the buyer would have to offer to acquire the entire company.

Cairn Energy Plc, which has kept the management of its subsidiary out of the talks, today deputed Cairn India CEO Rahul Dhir to brief the government whose approval is crucial for the deal to go through.

After meeting Dhir, Oil Secretary S Sundareshan said the deal will need the government’s approval.

All production sharing contracts (PSCs) signed by companies for exploring for oil and gas have provisions for government approval if some stake in the field or the company were sold, he said.

Dhir said he was not part of the discussions that were being conducted by Cairn India’s parent company.

“To me it looks like they (Cairn Energy Plc) are not exiting completely… I am not aware of (the details). The discussions are taking place between majority shareholder and Vedanta. I am not part of those discussions,” he said.

If it is successful, Vedanta — which has iron ore, zinc and copper mines — will be the second largest miner in the world after BHP Billiton to have an interest in oil.

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